Bank Scams are reaction of fragile system

After having cleared cutoff percentile at MBA Institute, you will be invited for Group Discussion and now it is must for you to practice with variety of GD topics.

Read and develop points for discussion for GD Topic : Bank Scams are reaction of fragile system

The recent multi-million dollar scam to hit the Indian banking sector has once again exposed the fragile ecosystem that banks operate in. The ease with which borrowers have manipulated and made a mockery of the system calls for deep introspection and stringent action against the defaulters.

Weak risk management

Bank scams happen and will continue to happen due to weak risk management. The failure of banks to put in place a framework for effective risk management offers a window to people with dubious intentions to run away with public money. The recent scam pegged at more than Rs.11,300 crore has exposed the weak risk management, especially in public sector banks. The Finance Minister Mr.Arun Jaitley raised questions on the role of auditors and bank managements in exercising the powers vested in them and preventing such scams. As long as banks take risk management seriously and make provisions to cover their risks, for instance, Non-Performing Assets (NPA), these scams shall keep hurting the economy and public sentiment.

Corruption

It seems clear that any scam, particularly bank scams cannot happen without the connivance of insiders. Corruption has become a major hindrance to India’s growth story and is something that gnaws at the roots of the country, thus, making it fragile. The lure of money drives people to help scamsters cheat the public and weakens the entire system on which the financial institutions of the country rest. Therefore, corruption must not be allowed to become ingrained in the system and the corrupt should be targeted.

Arrogance of the wealthy

Usually, people who are rich and live a luxurious life, are found orchestrating these scams. Vijay Mallya, Nirav Modi and Lalit Modi are names of people in recent times, who have shown their backs to the Indian banks and are wanted in various cases of money laundering, fraud and other financial crimes. Their complete arrogance, insensitivity and belief that they are above the law needs to be nipped in the bud. In a country such as India, with a wide gap between the rich and the poor, it is often the case that the rich manipulate the law for their benefit while the poor wither away under the burden of poverty and injustice. This needs to change.

Fear of Law

A number of bank scams in India reflect the complete absence of fear of law in the people who commit these frauds. These people know how to exploit the weaknesses of the Indian law and judiciary and succeed in keeping the law at bay. An easy path that a lot of these scamsters have adopted is to flee from the country in time and evade being arrested. What follows is a lengthy, often unsuccessful, process of trying to get them extradited from foreign shores and recover the tax payers’ money.

Existing laws need to be implemented effectively and new laws, if needed, need to be framed immediately, so that people think twice before committing a fraud. An example must be made out of such people, which acts as a deterrent.

Overhaul of the system

The system needs to be overhauled completely and the inner controls of banks need to be strengthened. Public sector banks cannot be left at the mercy of fate. They must realise that the public puts a lot of trust in them to safeguard their hard-earned money and they cannot afford to let this trust break.

The system needs to tighten its loose ends and correct its weaknesses otherwise these bank scams will keep mocking the system and will erode the trust between banks and the public completely.